Stocks Claw Their Way Back While Interest Rates Drift

It looks like the initial selling in common stocks has ended and shares are moving slowly higher. I would think they are in a ‘wait and see’ period. Of course this wait and see could last just hours–or days. Uncertainty will last for a while–no doubt there are more undiagnosed cases of corona virus in the U.S., but if the reports come in slowly and are modest in number things will stabilize.

Interest rates, as measured by the 10 year treasury are now at 1.62%–down 6-7 basis points today. In my opinion rates were going to this level 1 way or another—I just didn’t think it would be a virus that sent them down. Recall that rates on the 10 year were down at the 1.45% in September–so the current rate is not a new low. We all know that rates could spike way up based on inflation or many others reasons–they could also drift lower and lower. So really since I could make a case for either higher or lower rates there is no reason to change anything I have been doing for months and months–probably will have to live with a high level of cash for a long, long time.

The average $25 preferred and baby bond is off 3 cents today–so we are seeing a bit of disruption–but it was long overdue anyway. I am seeing some of the energy shippers off today–Tsakos Energy Navigation (TNP) issues and Teekay Offshore preferreds (now owned by Brookfield Business Partners) as well. For those with a taste for higher risk maybe there is a bargain being created here.

25 thoughts on “Stocks Claw Their Way Back While Interest Rates Drift”

  1. Tim,
    Did you look at MNR-C (you mentioned you would)? It was trading around par yesterday… I have a token amount of shares.

    H

    1. Tim: I have 1000 shares of MNR-C and sleep very well at night. Actually, their common stock was the first one I ever bought and dripped, maybe 30 years ago. Back then their biggest warehouse customer was Keebler Cookies. Landy family still runs the show. Other than their little money losing foray into investing in REITS and BDC’s, they are solid IMHO. I believe they still have the controlling interest in UMH as well, not sure.

      1. Thanks for the reminder Bill S. I see it is ex 2/14 so I have entered an order this morning. Looks pretty much what I am looking.

      2. Bill, I have been a player here also. A couple a days ago I bought 1000 at 25.02 when it was liquid at end of day (actually its been very liquid for several days). I finished buying a few hundred more today at 25.11. I have been in and out over the years. I enjoyed owning MNR-A and MNR-B more than C, but who wouldnt have since they paid over 100 bps more, ha. This will be a shameless dividend flip play.
        Yes, the Landys control both still. MNR is basically in bed with Fed Ex as they rent something like 50% of their buildings. But the terms are staggered and they have partnered since the early 90’s. I thought Brad Thomas said MNR has been separated from the goofy investment pot of loser mall reit preferreds the Landys were infatuated with. If not they will be soon. That was the biggest drag on their financials.

  2. Here’s a good morning laugher for you guys. I just got my call from my stock jockey and he says “Hey Chuck we got a brand new bond from UNION PACIFIC. 50 Year Bond with a Yield of 3.81%. He knows I like the long maturities because of the higher coupons. I said “Hey Joe, we’ve got a bad connection and I’ll have to get back to you much later”. LOL

    1. Chuck–you know UP bonds are an easy sell in the Omaha area. Could be worse–many euronotes are being sold in the <1% area by U.S. companies.

  3. Just got a fill this morning for 3,000 shares of “COF+P”. Its been callable since 9/1/17 and they have never called it. I got filled for my entire order at $25.40 and now I see its at $25.36. No big deal. Its a 6% coupon which pays $1.50 annualized. I thought it was worth “taking a chance” on it as like I said its been callable since Sept. 1st, 2017. So obviously they are in no hurry. The company is Capital One the credit card company. The stock is over $100.00 per share so I felt comfortable with it. Like I said earlier hope we can share ideas with each other on this site.

    1. Chuck, there is usually no free lunch. There is usually a drop for a reason. The reason why you got your 3,000 shares at 25.40 is because they just issued a new 5% one. Since COF-P is the next one to be called, this is why it dropped. Many companies are in fact in a hurry to call and re-issue. That has been a common theme in the last 6 months.

      SteveA sold today at $25.40, so you probably bought his shares. :-).

      1. Mr. Lucky; Well if they call it and they probably will then I will lose 2 1/2 cents per share. As Iam guessing that they will have to give notice (usually 30 days) and the next payment is scheduled for March 1st. So if I lose $75 on the bad decision I made I can live with that. I had no idea they were in the process of issuing a new one again. Actually it is extremely “rare” that I ever buy anything that has a short call time frame and I guess this is a good lesson.

        1. Right Chuck. Losing 2 1/2 cents is not very painful. It is more like frustration and angst is what it causes. 🙂 Then if you hold onto it, or they freeze it by changing the symbol… it is then having several thousand shares sitting there, earning zilch, tied up until they release the money back to you, and knowing that there is nothing you can do but wait…and then thanking them and paying them a few cents for every share for holding onto your money.

  4. For those of you that don’t own it you might want to do some homework on “HESM”. I bought some friday which was just an add to a very large position that I already own. Now own 7,500 shares. They just increased their distribution today and now its at $1.70. The stock closed today at $22.99 which gives you a “Yield of 7.39%”. I’ve read several pretty lengthy articles on the company and they seem very rock solid. Iam new to this site (about 2 weeks now) and hopefully we can all share ideas and help each other in a very difficult environment for fixed income investors.

  5. Hi, Tim, Tried to scoop up a few TNP-F down around 23.8 but Fido says I have to call it in and no can do in cubicle land. See how market closes, may phone in a GTC order tonight

    1. I guess Fido wants to protect you from easily purchasing F-F preferreds and baby bonds (while letting you buy penny stocks on margin). I emphasize this every time I talk to one of their reps (and I’m considered a “private client”), as well as telling them that I’ve taken that business elsewhere. Maybe if enough customers complain??

      1. Moved to Schwab 2 yrs ago for their nannying of me. Very happy.
        looking at a rights offering now- no charge. It might be $35 or so at Fid – if they allow it.

      2. Fido has an issue with floating rate preferreds, whether they float from the start or after a fixed rate. No problem with baby bonds that I have experienced.
        Yes, CR…I complain about this situation every time I have to call in. I don’t know why we can’t electronically “sign” a waiver like we do for triple leveraged securities and the like.
        I moved some money to Schwab a couple of years ago in case I wanted to buy something without calling the Fido bond desk. I keep money at Fido because I like their trading platform better than Schwab’s.

        1. D–I have a fairly large account there as well–but when they reject the order I just go to etrade where we have 2 accounts.

          1. The problem with having several accounts is when I find something I want to trade, then have to go login to another account to trade it. I have too many accounts and thinking about consolidating them. Since commission went away I’ve been making alot more small trades and it gets cumbersome.

            Fidelity is also my largest account. I like that they pay MM rates on sweeps account.

  6. Sold off a few things. If flu season gets worse I’ll buy them back cheaper. Not much to lose, I’m a buyer either way.

    1. Did the same thing. Sold off a bunch Friday and a bunch more today. I figure I can always buy back in a few weeks time if this blows over. I am 35% in cash now (usually ~15%) , the highest I have been in the last few years.

      1. Libero-

        I am right with you and it is very very frustrating. I just do not want to put any more money to work with stocks at all time high, bonds yielding nothing, and political uncertainty everywhere.

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